Cryptocurrency exchange FTX is close to buying the remaining assets of digital currency lender BlockFi for $25 million, according to CNBC.
According to sources close to the matter, BlockFi equity investors were hurt and are now closing their positions at a loss. Also, the deal with FTX could take several months to close, which opens up the possibility that the price will change during that period. As of mid-June 2021, BlockFi had a valuation of $5 billion.
At the beginning of this year, BlockFi had over a million customers, over $10 billion in assets and deposits, and had distributed over $700 million in cryptocurrency rewards and interest. However, BlockFi’s fortunes quickly turned for the worse after it reportedly became a major creditor of the now-disgraced hedge fund Three Arrow Capital, also know as 3AC. As a result, it was forced to liquidate the positions of 3AC, which amounted to USD 1,330 million, probably with bigger losses as the bear market intensified in June.
The situation was exacerbated by the fact that 3AC deposited $400 million worth of Grayscale Bitcoin Investment Trust (GBTC) shares as collateral for the loan, which often trade at a discount or premium to the spot price of Bitcoin (BTC). . At the time of the settlement, GBTC shares were trading at a 34% discount to the net asset value of its Bitcoin holdings, a value that plummeted further as BlockFi began to close out the position.
Earlier this month, BlockFi said it would lay off 20% of its 850 employees due to its short-term profitability issues. Last week, FTX extended a $250 million line of credit to BlockFi and debunked rumors that it planned to acquire the ill-fated company.
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